Heckler v. Turner
Headline: Welfare rule upheld: Court allows mandatory payroll tax withholdings to be counted within the $75 monthly work-expense disregard, reducing benefits for families with working members while states calculate AFDC need.
Holding: The Court held that mandatory payroll tax withholdings are included within the $75 flat monthly work-expense disregard and must be deducted from gross earned income when states compute AFDC need, siding with the Secretary.
- Reduces monthly AFDC payments for working families whose payroll taxes fall under the $75 disregard.
- Allows states to apply the $75 work-expense disregard to payroll tax withholdings.
Summary
Background
Respondents are a class of California families receiving Aid to Families with Dependent Children (AFDC) who challenged California regulations that followed the Secretary of Health and Human Services’ guidance after the 1981 changes to the Social Security Act. Congress replaced a rule requiring states to itemize work-related expenses with a flat $75 monthly "work expense" disregard for earned income. The Secretary advised states to treat mandatory payroll deductions (like taxes and social security) as part of that $75 disregard and to apply the disregard to gross earned income, which led California to cut benefits for about 45,000 families. Lower courts ruled for the recipients, but the issue reached this Court.
Reasoning
The central question was whether mandatory payroll withholdings must be subtracted from a family’s income independently or are covered by the new $75 flat disregard. The Court examined the statute’s language, the Department’s longstanding regulations defining "earned income" as gross pay regardless of personal deductions, historical administrative practice, and congressional reports. Those materials showed that tax withholdings historically were treated as work-related expenses and that Congress intended the flat $75 to replace itemized work expenses. The Court therefore sided with the Secretary’s interpretation and concluded the $75 flat-sum disregard is the source of any offset for mandatory payroll tax withholdings.
Real world impact
As a result, states may apply the $75 monthly disregard against gross earned income including payroll tax withholdings, which reduces AFDC benefit amounts for many working families. The opinion also notes Congress later amended the statute in 1984 to define "earned income" as gross earnings before deductions, reinforcing the Secretary’s approach prospectively.
Ask about this case
Ask questions about the entire case, including all opinions (majority, concurrences, dissents).
What was the Court's main decision and reasoning?
How did the dissenting opinions differ from the majority?
What are the practical implications of this ruling?